Huntington Beach, California Attorney, Mark W. Bidwell

The post death transfer of real property is by either a planunder your control or by the default plan provided by California law.

A revocable, living trust is the best plan for someone living in California. A trust identifies heirs, avoids probate and provides for contingencies if the original plan fails. A revocable, living trust has no unfavorable tax consequences and can be changed at any time.  

No planning relies on the laws of intestacy and probate administration.

Intestacy law identifies who is the next of kin. As a general rule the surviving spouse is the default next of kin and If there is no surviving spouse, then the children of the deceased are next. If there is no spouse or children, then parents inherit or if no parents survive, brothers and sisters inherit and so on until the nearest living relative is found. The intestacy laws follow what most people would do if they planned.

Planning is not required for the post death transfer of real property. Unplanned post death transfers occur under the administration of the probate court. The problem is the transfer of real property in probate court requires court hearings, takes time and is expensive.  But these are not problems for the decedent, but for the decedent’s heirs.

If an owner of real property is concerned about who will inherit the real property or the cost and time of the post death transfer, planning is needed. Most plans are not complete plans. For example, a will is not a complete plan. It does state who will inherit, but a will does not avoid probate administration.

Joint ownership of real property and transfer on death deeds can be complete plans if the intended heir does not predecease the owner. But if the intended heir predeceases, joint ownership and a transfer on death deed are as if the real property owner did no planning.  

A gift is a complete plan. But the gift is in effect the abdication of any responsibility and the surrender of control of the real property. Life time gifts also have unfavorable tax consequences when compared to post death transfers of real property.

Deed of Trust and Trust Deed

These are not deeds of change in ownership! A "deed of trust" also known as a "trust deed" is its own trust. The owner of the property is the creator/settlor. The lender is the beneficiary. A third party is identified as the trustee.

A "trust deed" secures the lender's loan with the real property. A trust deed  is similar to a mortage. But a mortgage requires judicial action to foreclose. A trust deed beneficiary (the lender) can have the trustee foreclose without a court filing. With a trust deed, a property owner empowers the lender, if the loan is past due, to foreclose without court supervision.

Comprehensive Estate Plan includes:

• revocable, living trust
• will,
• power of attorney
• health care documents
• transfer deeds for the home and other real estate owned

Call 714-846-2888 for a meeting to discuss your needs

Funding a Trust

In California the vast majority of trusts are created to avoid probate and provide for the orderly transfer of assets at a minimum cost and effort.  By avoiding probate court, living trusts save money and time and are not part of the public record. But a trust cannot just be created, it must also be “funded.”

An unfunded trust is exactly like a Will in that it does not avoid probate.  This is a common and very costly mistake.

“Funding a trust” is the transfer of ownership from the individual to the trust. Assets are transferred into trusts as follows.

Real estate is transferred by deed from the trust creator to the creator’s trust. The deed is recorded with the County Recorder. In each trust document a person known as the “successor trustee” is identified. Upon death of the trust creator, the successor trustee takes control of the real property via a document known as “affidavit of death of trustee.” 

Bank, brokerage and stock accounts are funded into the trust by ownership transfer from the individual into the trust. The owner contacts the bank and stock brokers to change ownership. Documentation and procedure requirements vary for each bank and broker.

Retirement plans and life insurance policies are funded by designated beneficiary. A designated beneficiary is a person or trust identified as the heir of a retirement account or life insurance policy.

Plan administrators and life insurance companies provide forms for the owner to name the designated beneficiary.

For retirement accounts, the primary designated beneficiary should be the non-owning spouse and the alternate or secondary beneficiary should be the trust. For life insurance policies, the primary designated beneficiary should be the trust.

A trust also needs a Will, commonly referred to as a “Pour-Over Will”. Most trusts are prepared to avoid probate. But if an asset is not funded into a trust, the probate of a Will may be needed. 

In the event probate is needed, the Will is the document to file. In the body of the Will the distribution of assets should be into the trust. The assets of the probate estate then “pour-over” into the Trust.

Funding a trust is an important step in avoiding probate through proper estate planning. This tip sheet is intended to provide information and education, but it’s advisable to consult with an attorney when finalizing your plans in order to avoid even larger and more costly problems in the future. 

Attorney Prepared Living Trusts, Wills and Estate Plans

To set up a meeting to discuss your needs . . .

call 714-846-2888